Court Slams Taxpayer for Delaying Tactics, Imposes Costs for Abuse of Legal Process

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Case Name

Tulsidas Trading Pvt. Ltd Vs Tax Recovery Officer (High Court of Bombay)

Writ Petition No. 911 of 2016

Date: 20th July 2016

Key Takeaways

1. Courts take a dim view of parties who abuse the legal process by seeking contradictory reliefs.
2. Repeatedly seeking adjournments while simultaneously asking for early hearings can be seen as time-delaying tactics.
3. Courts may impose costs to discourage such behavior and ensure the efficient administration of justice.

Issue

Is the petitioner’s conduct of seeking early hearing through a court petition while simultaneously requesting adjournments before the CIT(A) an abuse of the legal process?

Facts

1. The petitioner, Tulsidas Trading Pvt. Ltd., filed a petition under Article 226 of the Constitution of India on March 30, 2016.
2. They asked the court to:
3. a) Quash a notice dated February 10, 2016, issued by the Tax Recovery Officer demanding Rs. 7.19 crores plus interest.
4. b) Direct the CIT(A) to give an early hearing of their appeal against an Assessment Order dated March 20, 2015.
5. While this petition was pending, the CIT(A) scheduled several hearings:

• April 20, 2016: Petitioner sought time as the Director was out of town.
• May 17, 2016: Petitioner sought time as their Chartered Accountant was on summer vacation.
• May 26, 2016: Petitioner again sought time for the same reason.
• July 11, 2016: Petitioner requested adjournment to August, citing their Chartered Accountant’s other commitments.

6. The petitioner’s conduct of repeatedly seeking adjournments while their petition for early hearing was pending in the High Court raised concerns about their intentions.

Arguments

Petitioner’s side:

• Sought to challenge the Tax Recovery Officer’s notice.
• Requested early hearing of their appeal before the CIT(A).
• Asked for time to amend their petition to challenge an earlier order rejecting their stay application.

Revenue’s side (represented by Mr. Chhotaray):

• Argued that the petition was not filed in good faith.
• Pointed out the contradiction between seeking early hearing in court and repeatedly asking for adjournments before the CIT(A).
• Presented evidence of the petitioner’s multiple requests for adjournments on various grounds.

Key Legal Precedents

The judgment doesn’t explicitly cite any legal precedents. However, it relies on the general principle that courts have the power to prevent abuse of the legal process and ensure the efficient administration of justice.

Judgement

The High Court:

1. Dismissed the petition.
2. Directed the petitioner to pay costs of Rs. 20,000 to the Principal Commissioner of Income Tax-13, Mumbai by August 4, 2016.
3. Made the payment of costs a condition precedent for the CIT(A) to hear the petitioner’s appeal.
4. Concluded that the petitioner’s conduct was an abuse of the legal process, appearing to be time-delaying tactics.

FAQs

Q: Why did the court impose costs on the petitioner?

A: The court imposed costs because it found the petitioner’s conduct to be an abuse of the legal process. They were seeking early hearing through a court petition while simultaneously asking for adjournments in the actual hearings.

Q: What does “condition precedent” mean in this context?

A: It means that the petitioner must pay the Rs. 20,000 costs before the CIT(A) will hear their appeal. It’s a requirement that must be fulfilled first.

Q: Could the petitioner still have their appeal heard by the CIT(A)?

A: Yes, but only after paying the imposed costs of Rs. 20,000 and proving the payment to the CIT(A).

Q: What lesson can other litigants learn from this case?

A: It’s crucial to be consistent in your actions before different legal forums. Seeking contradictory reliefs or delaying tactics can lead to adverse consequences, including dismissal of your case and imposition of costs.

Q: Did the court address the merits of the tax dispute?

A: No, the court focused on the petitioner’s conduct rather than the underlying tax dispute. The merits of the case would likely be heard by the CIT(A) once the costs are paid.

1. This petition under Article 226 of the Constitution of India seeks that :

(a) Notice dated 10th February, 2016 issued by the Tax Recovery Officer certifying that the sum of Rs.7.19 crores plus interest under Section 220(2) of the Income Tax Act, 1961 (the 'Act') is due from the petitioner be quashed and set aside; and

(b) The Commissioner of Income Tax (Appeals) [CIT (A)] before whom the appeal from the Assessment Order dated 20th March, 2015 is pending be directed to give an early hearing of the appeal to the petitioner.

2. This petition was filed on 30th March, 2016. The impugned notice dated 10th February, 2016 has been issued long after the order dated 11th May, 2015 of Assessing Officer rejecting the stay application of the petitioner under Section 220(6) of the Act. In the petition as filed there is no challenge to the order dated 11th May, 2015 rejecting the petitioner's application for stay. On the aforesaid facts being pointed out, Mr.Gandhi, learned counsel for the petitioner seeks time to amend the petition to challenge theorder dated 11th May, 2015 of the Assessing Officer.

3. Mr.Chhotaray, learned counsel appearing for the revenue opposes the same and submits that petition as filed is not bonafide. This according to him is evident from the fact that the prayer in the petition is for early hearing of the appeal by the CIT (A). However, when the CIT (A) had scheduled the hearing of the appeal, the petitioner is seeking time again and again. The CIT (A) had fixed the hearing on 20th April, 2016. The petitioner sought time as its Director was out of town. Thereafter a hearing of appeal was fixed on 17th May, 2016. At that time also the petitioner sought time as its Chartered Accountant was on summer vacation. The CIT (A) then scheduled the hearing of the appeal on 26th May, 2016. In response, the petitioner again sought time on the ground that the Chartered Accountant is on summer vacation as stated in the affidavit in reply. Thereafter, Mr. Chhotaray tenders across the bar a communication dated 11th July, 2016 from the petitioner's to the CIT (A) recording the fact that hearing fixed on 11th July, 2016 cannot be attended as its Chartered Accountant is pre-occupied in other professional assignment and therefore requests that appeal be adjourned to a date sometime in August 2016.

4. This conduct on part of the petitioner filing the petition interalia seeking early hearing of its appeal before the CIT (A) and at the same time when the appeal is fixed for hearing by the CIT (A), the petitioner is seeking adjournment on frivolous grounds indicating that the petitioner is not serious about attending the hearing. It appears to be time delaying tactics and abuse of the legal process. In fact on 11th July, 2016 the last adjournment sought by the petitioner was to fix the hearing of the appeal in August 2016. The very fact that the petitioner has been seeking adjournment time and again before the CIT (A) and filing the petition in this Court seeking early hearing of its appeal is an abuse of the process of law.

5. In the above view the petitioner is directed to pay costs of Rs.20,000/- by Pay Order to “the Principal Commissioner of Income Tax-13, Mumbai” on or before 4th August, 2016. This payment of cost on or before 4th August, 2016 is a condition precedent for the CIT (A) hearing the petitioner's appeal. The petitioner would satisfy the CIT (A) that the above cost of Rs.20,000/- has been paid.

6. Petition dismissed.

(A.K. MENON,J.) (M. S. SANKLECHA,J.)